Lesetja Kganyago, Governor of the SA Reserve Bank, has announced that the repo rate will rise to 6.75% from 6.5%.
The repo rate is the benchmark interest rate at which the central bank lends money to other banks like ABSA, FNB and Standard Bank.
Changes in the repo rate affect the prime lending rate, which is the rate banks use as a starting point to calculate interest rates for their clients.
With the repo rate at 6.75%, the prime lending rate will increase to 10.25%.
The decision was a close call.
Kganyago said that three of bank’s monetary policy committee preferred an unchanged stance, while three voted for a 25 basis point hike.
The governor said SA’s domestic growth outlook remained challenging. The bank has slightly downgraded its GDP growth rate for 2018 from 0.7% to 0.6%.
Kganyago said the central bank was looking at four 25 basis points hikes by the end of 2020. This would bring the repo rate to 7.5% by the end of 2020.